EU Leaders Agree On New Budget Treaty

BRUSSELS -- Twenty-five of 27 European Union member states have agreed on a new fiscal treaty that imposes fiscal discipline in the eurozone by asking signatories to introduce a balanced budget rule into their national legislation.

The Czech Republic and United Kingdom opted out.

The new treaty will be signed by the EU leaders at a summit scheduled for March 1-2 and will enter into force when 12 countries have ratified it.

The process will allow it to start functioning even if Ireland, whose constitution requires it to hold a popular vote on international treaties, decides to hold a referendum on the text.

The United Kingdom, which rejected the fiscal compact at a similar summit in December, will be present during future eurozone summits as an observer, whereas the Czech Republic might join at a later stage. Prague has asked for more time to study the document.

The signatories of the text committed to balanced budgets and the establishment of "automatic consequences" if projected targets are missed by too big a margin.

The European Court of Justice would be given authority to verify implementation of the agreement.

Compromise Solution

Swedish Prime Minister Fredrik Reinfeldt said after the meeting that he was happy with the text.

"You can say that this is a strengthening of our influence, which has been important for us," he said.

The leaders reached agreement on the treaty after finding a compromise solution to the question of whether noneurozone countries should be allowed to attend the two additional yearly eurozone summits proposed in the agreement.

The half-day meeting, which was aimed at stimulating growth and creating jobs at a time when governments across Europe are slashing public spending and raising taxes to solve their debt problems, was dominated by a rift between France -- which wanted only the 17 countries who use the common currency at the summits -- and Poland, which pushed for the participation of 10 countries not on the euro.

A compromise deal allowing the noneurozone members to attend at least one of the two summits was rejected by Polish Prime Minister Donald Tusk ahead of the meeting.

"Poland, as well as many other countries, is ready to take responsibility for the fiscal compact but under one condition: that these countries also will participate in the decision-making process of how this fiscal compact is executed," Tusk told reporters.

Warsaw acquiesced when a line of text was added that spelled out the conditions for when the noneurozone member states could participate in the summits.

Second Greek Bailout?

Leaders also discussed making a second attempt to save Greece from bankruptcy, even though the topic wasn't on the official agenda.

Over the weekend, German officials suggested putting Greece's budget under EU control, amid criticism that the debt-ridden Mediterranean country has failed to implement promised reforms and deep austerity cuts.

Athens ruled out that suggestion as a violation of its national sovereignty -- a position with which several leaders at the summit agreed.

A second Greek bailout would have to be in place by March if the country is to avoid default, but Athens is still negotiating with private banks on a debt write-off, which the EU had made a prerequisite to more aid.